Many Small and Mid-Sized Foundations Plan to Cut Grantmaking This Year, Survey Finds

March 18, 2010

According to new survey results from Graystone Consulting and the Association of Small Foundations, roughly half of the small and mid-sized foundations in the country intend to make changes to their spending and grantmaking policies in 2010, with many saying they plan to cut their grantmaking budgets.

Conducted in February, the survey found that 49 percent of respondents ranked the federal deficit as the issue most responsible for their cautious outlook, with China's large holdings of U.S. debt, government bailout programs, and the fallout from the AIG situation receiving less attention. Meanwhile, 14 percent of respondents cited portfolio liquidity as a pressing concern — a smaller percentage than one might expect, in part because small foundations either dealt with their liquidity problems last year or have less exposure to illiquid assets than larger foundations, said Graystone Consulting director Henry Kaplan.

The survey also found that 20 percent of respondents did not have an investment policy statement; 18 percent did not have a rebalancing policy; and 61 percent did not intend to change their asset allocation, with those considering modifications to their portfolios mainly focused on reducing cash and small-cap U.S. stock holdings and/or increasing their exposure to international and emerging equity markets. Cash, U.S. large cap equities, and investment-grade bonds were the largest sources of funds used by respondents to help meet their grant obligations.

"This may have an unfortunate ripple effect on many nonprofit organizations that rely on grants to fund their charitable and community-minded activities," said Kaplan. "Most foundations are reluctant to curtail spending at this time, but recognize it may be expedient to do so as they recover from losses sustained in 2008 and early 2009....On a positive note, the majority of survey respondents saw an increase in net assets for 2009 and believe that 2010 will provide opportunities to make up lost capital."